House debates

Wednesday, 31 October 2012


Wheat Export Marketing Amendment Bill 2012; Second Reading

5:45 pm

Photo of Dennis JensenDennis Jensen (Tangney, Liberal Party) Share this | Hansard source

I hope tonight to explain the concerns I have about the Wheat Export Marketing Amendment Bill 2012. For me, politics is about clear and robust principles and philosophies. From these cast-iron principles good policy should flow. Those on this side should seek to honour our founder, Robert Menzies, and his philosophy of expanding freedom in whatever realm. It is my job, by definition, to stand up for the views of the people I represent in this place.

My electorate in Western Australia includes stakeholders of Cooperative Bulk Handling Ltd, the WA Farmers Federation, the WA Pastoralists and Graziers Association and the WA Liberal Party—both the grassroots and the parliamentary party. They all want to go back to the free market. Regulation is not a natural position, and it is certainly not natural for the Liberal Party to oppose cutting red tape. Note that blue pumps through my heart.

The Wheat Export Marketing Amendment Bill 2012 offers an imperfect but expeditious road to deregulation. It puts in place a time frame and an end date. It gives certainty to farmers that they will be able to sell their wheat again without the diktats of bureaucrats in far-off offices. It is time to tell weak-wristed, water-cooler dictators: 'Hands off, Mate! It's their wheat, and they should be allowed to sell it on their terms.' I remind a sound-bite obsessed House to look upon the difference of opinion in the Liberal Party not as weakness but as strength, for in our party there is a competitive marketplace of ideas, and it is this struggle that leads to better policy for all Australians. Labor group-think is in reality Labor no-think.

It has been said that the wheat industry is not ready for full deregulation and that not all farmers support it, but the wheat industry has been deregulated since 2008, following the removal of the single desk, and has been transitioning towards full deregulation for the past five years. It has been sad that WEA could provide oversight on bulk handlers. But The WEA's only legislated role is to administer a fit and proper financial assessment on bulk wheat exporters before they receive accreditation to export bulk wheat. The WEA does not provide industry oversight and has never assessed port access undertakings. That is the role of the ACCC. If the ACCC believes that a bulk handler is operating outside their port access undertaking, they can instruct the WEA to suspend or withdraw accreditation.

If oversight is the objective, then why not take the moneys that would have funded an ineffective organisation in the WEA, put it into ACCC—an effective oversight organisation—and beef it up? It has been said that ACCC is a toothless tiger when it comes to port access. But under WEMA wheat is classified as a regulated industry and, as such, the role and functions of the ACCC are prescribed and limited to port access only. Removal of WEMA would permit greater scrutiny by the ACCC over all operations of the bulk handlers, not just port, including upstream storage and handling charges. The ACCC can also investigate any aspects of possible collusion between bulk handlers or exporters, with penalties the same as for any other breach of the Competition and Consumer Act.

It was the legacy of 70 years of statutory marketing that led to the bulk handlers retaining port facilities. However, since deregulation, the BHCs—bulk handling companies—have made substantial investments in port facilities, including capital improvements. Now bulk handling companies are being told by the WEA to share these facilities with competitors, despite such competitors not being forced to make a contribution to capital investment and cost recoupment. Prolonging the WEA, with its overhang of port access authority, is just delaying possible solutions to this stalemate.

Nobody has yet explained the role of growers in this and why government should get involved. If growers get involved with such port based committees, surely they must then be willing to make a contribution to port capital infrastructure development. It has been said that an industry code of conduct needs to be developed prior to removing the WEA. Stage 2 of the bill calls for the development of a non-prescribed industry code of conduct for all grain export terminals to meet the needs of exporters and growers, consistent with ACCC guidelines for developing effective voluntary codes of conduct that include continuous disclosure rules. The development of this code of conduct has been underway since February this year, and consists of a code development committee, comprising key stakeholder representation, including nominees appointed on behalf of port owners, major users, industry and producers. Secretarial duties are performed by Grain Trade Australia. The ACCC and DAFF are also members.

The trend is the same. Things that should be done quickly go on and on. It has been said that growers want greater involvement with Grain Trade Australia before the industry code of conduct is accepted. Currently the National Farmers' Federation and Grain Producers Australia represent growers on the CDC, and the Pastoralists and Graziers Association has written to the chair seeking membership, as the two organisations have little, if any, representation in Western Australia. Port access does not directly affect farmers. The vast majority of farmers sell either on-farm or from private up-country storage, and all ongoing supply chain costs are the responsibility of the merchant or exporter. It is still an ongoing role of ACCC to ensure competition amongst merchants and exporters, irrespective of what happens to the WEA.

We are told that until better port access is achieved there is room for manipulation by the bulk handlers to support their monopoly, which is the case in South Australia, where you can only deal with Viterra—and soon only Glencore. ABB demutualised to become ABB Grain on 1 July 1999, and in 2004 it merged with storage and handling company AusBulk and the holding company United Grower Holdings. In September 2009, the shareholders of ABB—mostly farmers—voted in favour of a merger with Viterra, which is the largest grain handler in Canada. In the 2010 season, Viterra made several mistakes which impacted on the efficiency and cost of grain movements out of South Australia. However, they have subsequently improved their operations accordingly and are now looking at a takeover by Glencore.

Now that the sale to Glencore is looming, there will be capital investment, international experience and better leadership to sort out SA problems, particularly when ACCC has far more power over a private company than it does under WEMA.

There is a requirement for appropriate transparency standards in relation to stock information, as there are huge margins for growers in blending to achieve specific grades. While some growers do blend to maximize their margins, they do not require national public data collected and released by government to do so. If they are acting as blenders or merchants, there is quite sufficient regional information seeping out to keep them informed as to opportunities. Information leaks out to growers within regions. It is a matter of knowing where, and what the buyers want. Most importantly, an opportunity is soon lost when everyone knows about it.

We are told WEA would provide a competitive edge if it had a stock information collection role similar to that of USDA. But USDA does not report all US wheat stocks or survey all farm stocks; it relies on voluntary reporting of US commercial trade wheat inventories. It guesses what is unsold and on-farm based on regional yield-acreage samples over time.

The USA can better promote wheat competitively in East Asia because of supply consistency in both product quantity and quality. Until now, the Australian government has been publicly releasing stock and inventory data to all of our competitors so that they can base their trading decisions on this information. This has dramatically affected forward wheat futures market liquidity.

The WEA has never had any role in collecting stocks information, and there is already an agreement for stocks information to be published by the Grains Research and Development Corporation. Advocates and supporters for greater release of Australian wheat stock information have vested commercial interests. There are privacy laws that need to be respected for unsold individual wheat stocks, while the Personal Property Securities Act 2009 provides farmers with individual ownership and significant property information rights for unsold co-mingled product. There is no role for government in reporting private wheat stocks, particularly when such reporting disadvantages growers. If commercial interests voluntarily agree to publicly release their inventory data, then that is okay provided that it is not grower owned.

I turn to minimum quality standards. Given that farmers, industry, and government have little control over the quality of wheat produced in Australia, the government has at least acknowledged the matter is best dealt with through buyer and seller contractual specification agreements and international enforcement through GAFTA, supported by private grain-testing laboratories in Australia. If a government restricted exports to meet some vague brand integrity, Australian growers would suffer with increased domestic supplies, falling prices, and worsening bases.

The estimated eight million tonnes of wheat that was downgraded during the 2010 harvest languished in domestic storages for much of 2011 while prices fell from $330 per tonne in early 2011 to $210 per tonne. The only beneficiaries of brand integrity will be the domestic starch manufacturers at the lower-value end of the wheat chain. If a private exporter establishes brand integrity in an exclusive international supply chain niche, or if a merchant wants to export low quality volume, then it is up to them not government.

The quicker the wheat is sold the better it is, because it is a deteriorating biological product. It has been said that delaying the bill and allowing for an orderly transition is not deregulating the industry or the return of the single desk. The bill actually supports an orderly transition as the WEMA has done over the past five years. However, the coalition plan provides no certainty over the time frame or the manner that full deregulation will occur, and has no clear objectives or defined methods to achieve it, which can only lead to more government intervention. The coalition must accept that government cannot be expected to solve intrinsic industry problems, especially when the majority of growers and industry does not want it to do so. If WEA was in a position to prevent another Coles-Woolworths duopoly occurring then I would be in favour. But it does not, and cannot.

Yes, I am cognisant of the power of unintended consequences—and I refer here to the futures markets. Will there be a collapse in the price? No. The quality of wheat exported out of Australia is contingent on a variety of factors. However, I cannot but be optimistic, as the human and innovation capital invested in agriculture continues to increase. That is how Australia got to be where we are today, as the world's third largest exporter of wheat behind the US and the EU. So in a country where 70 per cent of the wheat production each year is exported throughout the world, this bill is important.

This bill is too important for partisan politics. How important is it for my state? Well, WA is the biggest wheat export state. It is the dominant crop in the agrisector and worth $3.5 billion per annum. The grain crop is about to be taken off in Western Australia. Farmers deserve to know the conditions under which they will sell their crops before they harvest their crops.

In sum, there are many reasons as to why one would and should back a move to a fully deregulated wheat market. Removing barriers to entry and moving to classical contestable markets will increase the true competitiveness of that market and increase the investment inflows to that industry. I am committed by party and philosophy to support any policy that will help rather than hinder investment. Investment means jobs, and there can be no doubt that jobs provide economic freedom. Freedom is the kernel of my argument and action. The Liberal Party was founded on this principle. If I do not seek that kernel now, then surely our party will be chaff to history.

The farmer is the only person in this economy who buys everything at retail, sells everything at wholesale and pays freight both ways. So it is timely that we in this House give the farmer a leg-up. It is time to put some trust and principle back into politics, and I cannot oppose this bill.


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